SEC Staff Issues Letters Requiring Inclusion of "Social Policy" in Proxy Proposals

SEC staff issued several letters in response to a number of company requests to exclude social policy proposals in company proxy materials under Rule 14a-8 ("Shareholder Proposals").

In the letters, SEC staff:

• required Citigroup to include in its proxy statement shareholder proposal requests to the company’s board to adopt a policy that commits to taking proactive measures to ensure lending and underwriting practices do not contribute to new fossil fuel supplies by the end of 2022;
• required Tractor Supply Company to include in its proposal (i) a report on whether the company participates in compensation and workforce practices that prioritize the company’s financial performance over the economic and social costs and risks created by inequality and racial and gender disparities and (ii) how such "costs and risks threaten the returns of diversified shareholders who rely on a stable and productive economy";
• required Eli Lilly and Company to include in its proposal a report on the company’s lobbying expenditures; and
• required Eli Lilly and Company to include in its proposal (i) a third-party review on whether the company’s lobbying activities align with its position on public policy and public statements such as “making medicines more accessible and affordable to patients” and “fairness and transparency in the biopharma industry,” and (ii) describing how the company addresses risks associated with any misaligned lobbying and whether it has any plans to mitigate these risks.

The SEC Division of Corporation Finance recently emphasized its decision that proxy proposals by shareholders relating to matters of social policy must generally be included in a firm's proxy statement so long as there is some reasonable relationship between the proposal and the firm's business. (See, Staff Legal Bulletin 14L, and generally, SEC Director of Corporation Finance Elaborates on Proxy Proposals Relating to Social Policy). SEC staff warned that matters of social policy would not fall under the ordinary business exception from inclusion in a firm's proxy statement if the SEC determined that the issue is one of a “sufficiently significant social policy."